RBI Q3 Monetary Policy

Prepared by:-

Deepak Ambulkar
PGDIIBM/09/043
Reserve Bank of India
 RBI is the main monetary authority of the country.

 It formulates, implements and monitors the monetary policy.

 RBI is the regulator and supervisor of the financial system in the

country.

 Issuer of currency.

 Prescribes broad parameters of banking operations within which the

country's banking and financial system functions.

 Bank to banks: maintains banking accounts of all scheduled banks

Monetary Policy
 Monetary policy is the process a central bank, or
monetary authority of a country uses to control
(i) the supply of money,

(ii) availability of money, and

(iii) rate of interest

to attain a set of objectives oriented towards the
growth and stability of the economy.

 Monetary policy rests on the relationship between the

rates of interest in an economy, that is the price at
which money can be borrowed, and the total supply of
money.
Highlights of Q3 monetary
Policy
 Cash Reserve Ratio (CRR) hiked by 75 BPS in two stages to 5.75%.
 About Rs360bn of excess liquidity will be absorbed through CRR hike.

 Bank rate retained at 6%.

 Repo rate has been retained at 4.75%.

 Reverse repo rate left unchanged at 3.25%.

 Shifting stance from 'managing the crisis' to 'managing the recovery'.
CONT…
 WPI inflation projection for FY10 hiked to 8.5% from
6.5%.
 RBI expects inflation to moderate from July 2010.
 FY10 GDP forecast hiked to 7.5% from 6% earlier.
CONT…
 India's Q3 GDP growth will be lower than Q2 due to deficient monsoon.
 Agricultural GDP growth in FY10 is expected to be near zero.

 Crude oil prices may increase sharply.

 High food prices will continue to intensify inflationary pressures.

 Large fiscal deficit poses risk to economic prospects.

 RBI awaiting the Govt's decision on phasing out transitory components of fiscal stimulus.
CONT…
 Global economy is showing increasing signs of
stabilization.
 Asian region experiencing a relatively stronger rebound.

 IMF revises projection of global growth for 2010 to

3.9%, up from 3.1%.
 Growth of emerging and developing economies is
projected at 6%, up from 5.1% earlier.

 IMF sees slack in resource utilisation will contain global

inflationary pressures.
 RBI sees some signs of asset price inflation globally
along with rise in commodity prices.
CONT…
 Exports expand in Nov. 2009 after contracting for 13
months.

 Non-bank sources of finance mitigate impact of

slowdown in bank credit growth.

 India is facing rising inflationary pressures, largely

due to supply side factors.

 Sustained increase in food prices is beginning to spill

over into other commodities and services too.
BHARTI VIDHYAPEETH,PUNE

QUESTION??????